Directors may find a champion in Sir Winston Churchill as they fight the battle of the bulging board information pack, says Chapman Tripp partner Roger Wallis on the release today of the firm’s 2019 New Zealand Corporate Governance – trends and insights report.
The document features an exasperated memorandum from Churchill in August 1940 titled “BREVITY” in which he sets out four rules for Westminster officials to follow when preparing cabinet papers.
“Churchill’s advice has stood the test of time – so much so that it could form a manifesto for the modern director, given that being drowned in paperwork is a common complaint among New Zealand directors, particularly for businesses in regulated sectors,” Wallis said.
“That is why we have chosen to reproduce the memo in full in our publication.”
The firm also explores whether the “shareholder primacy” model, which has prevailed for decades and is endorsed by the Companies Act, is now under serious challenge. Among the indications that it might be is the recent speech by Financial Markets Authority (FMA) CEO Rob Everett and the expansion in UK statute of the matters to which directors must have regard in their decision-making.
“Several of the currents we think will shape governance this year reflect a widening of the expectations both on and of directors in New Zealand. But, as of now, the strict legal obligation is still relatively narrow – to act “in what they believe is the best interests of the company” which “will often, but not necessarily, be what is in the best interests of existing shareholders”.
“Another debate we touch on in our commentary is at what point the use of dedicated board committees can compromise the board’s ability to take a broad strategic view, and reduce its effectiveness – an argument raised recently by veteran Australian director David Murray,” Wallis said.
Other themes expected to occupy boardrooms in 2019 include:
- a strong focus on culture as the ripple effects from the Hayne Inquiry and the FMA/Reserve Bank reviews are sluiced through the system
- closer scrutiny on directors from shareholders, stakeholders and regulators
- more comprehensive disclosure requirements
- increased liability risks, and
- continued development of a distinctive iwi strand in the wider governance culture.